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2 year IRS rule-home based businesses?

Discussion in 'Lawn Mowing' started by BAMARED, Aug 29, 2002.


    BAMARED LawnSite Member
    Posts: 206

    I'm not sure if these questions should go here or in the "Elements of Business" section of LS, so I put it in both to be sure. Please pardon me if this isn't "cool."

    At any rate, here's my questions:

    Does anyone know about a tax law that states if you claim part of your house payment & other related items that are used in your home-based business, that you have to pay these deductions back to the government if you sell your house within 2 years of closing your home-based business? (I know that's a long sentence.) But do you guys understand what I'm asking? How about if you claim all this stuff and sell your house but continue this business?

    Of these home-based business deductions, I wonder how much that you will actually get back?

    I'm going to see a $75/hour accountant in the next few days to inquire about opening up this home-based, part time lawncare business and I want to have done my homework and ask the right questions. Is there any questions that I should ask this accountant regarding a home-based, part time lawncare business that you would recommend?

    Thanks in advance,

  2. bruces

    bruces LawnSite Senior Member
    Posts: 648

    There are very specific rules regarding home office deductions.

    A lot of the deductions you would get for the "home office" portion of your home you get anyway if you itemize deductions (real estate taxes and mortgage interest).

    Ask your accountant about the rules, they can be tough to meet all of the requirements. You might find that the small deduction you gain isn't worth the hassle.

    Go over this thoroughly with your accountant.

    If you don't get a clear explanation let me know and I will try to help. (I'm a CPA also).
  3. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,841

    I don't have an answer for your question.

    But on a related note I know that if you are going to have a home office it has to be a legitimate office and you may be required to show proof. For instance, the room I am in right now (my office), there are no beds, no dressers, nothing you'd find in a regular room. Just book shelves with landscaping books, a big desk, computer, file cabinets, uniforms in the closet, etc. Once you throw in a futon or anything that makes it look at all like it's not an office, you are getting into trouble.

    Furthermore, I have heard from several CPAs and accountants that claiming a home office expense is one of the biggest red flags for an audit. Presumably, because most people abuse it and aren't claiming it legitimately. And several have told me that because of this, it's often not worth taking the risk and claiming a home office as an expense. I always have claimed it anyway because I figure if I am legit. I have nothing to hide or worry about. They can audit me all they want as long as I am doing everything right and can show proof.

    Anyway, just some tips there. I am sure you could also find a TON of articles on the internet in regards to this.
  4. TLS

    TLS LawnSite Fanatic
    Posts: 7,937

    bruces said it right!

    Too many odd requirements for a few measly dollars.

    BAMARED LawnSite Member
    Posts: 206

    I had suspision that the benefits of all the deductions would barely out weigh the $ saved.

    Thanks again,

  6. Fvstringpicker

    Fvstringpicker LawnSite Fanatic
    Posts: 7,603

    Bruce is giving it to you streight. The home/office deduction usually ain't worth the hassle and sometimes may even invite an audit. Make up for the deduction some place else.

    Roger Segrest

    I'm a CPA also.

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